X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Top performing largecaps of FY12 - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Apr 2, 2012

    Top performing largecaps of FY12

    The financial year 2011-2012 (FY12) was a rollercoaster year for the Indian stock markets with the BSE-Sensex fluctuating between levels of 16,000 and 18,000 for most part of the year. As compared to a year ago, the BSE-Sensex declined by about 11%. In this article, we have focused on largecaps and as such will be discussing the best performing stocks forming part of the BSE-100 Index. The list goes as follows - Idea Cellular (telecom), Hindustan Unilever Ltd. (FMCG), Colgate-Palmolive (FMCG), Indiabulls Financial Services (NBFC) and UltraTech Cement (cement).

    Idea Cellular (returns in FY12 - 46%; returns in FY11 - 3%)

    Sometimes bad news for competitors can translate into good news for one. And this is exactly what happened with Idea Cellular. Idea emerged as the top performing stock in FY12, with returns of about 46% over the last year. The sectoral index it is part of, the BSE-Teck Index declined by 8% during the year.

    As competition on the tariff front started to wane of, it severely hurt the prospects of the smaller companies which were competing purely on the price front and hence bleeding in their financials. At the same time, companies like Idea Cellular took a bold step to start increasing tariffs gradually. Despite this, the company's active subscriber base continued to expand. In fact, the company gained favorably on the MNP (Mobile Number Portability) front. By the end of FY12, the Supreme Court cancelled the 2G licenses of the new players. This again worked in the favour of Idea's stock price as it became one of the favoured ones to gain from the plight of the losing companies. Experts and investors expect the company to gain the subscriber shares from the companies whose licenses have been cancelled. Another aspect that worked in the favour of the company to some extent was the slower than expected turnaround in Bharti Airtel's African operations. As investors continued to grow wary of the incumbent, they started to focus more attention on the other listed player i.e. Idea Cellular.

    Hindustan Unilever or HUL (returns in FY12 - 44%, returns in FY11 - 1%) and Colgate-Palmolive (returns in FY12 - 37%; returns in FY11 - 21%)

    FMCG behemoth, HUL and Colgate emerged amongst the top performing large cap stocks last year. In fact, these stocks have outperformed the BSE-FMCG index, which increased by 25% YoY, by a strong margin. While HUL's stock rose by 44%, Colgate's stock gave 37% return in the last 12 months.

    The key reasons behind these stocks outperforming their peers have been their strong operating performances. This was especially at a time when concerns were raised relating to how FMCG companies would battle the high commodity inflation during last year. Not to mention that stocks from this sector tend to be a fall back for investors as they invest in defensive sectors during difficult times. As FMCG companies have relatively stable earnings and provide good dividends, regardless of the state of the overall stock markets, these stocks are preferred by investors during times of uncertainty. Over the long term, the overall FMCG sector has been touted to do well on the back of India's consumption led growth story. Coming to the operating performance of these companies, both saw strong growth in terms of volumes and revenues over the last year. During 9mFY12, HUL's sales grew by 16% YoY while it's operating profits increased by 24% YoY. The improvement at the operating level was mainly due calibrated price hikes and rationalization in advertisement spends. For Colgate, the situation was similar, albeit, mainly in the latest reported quarter. During the 9mFY12 period, the company's revenues grew by 18% YoY, while operating profits increased by 9% YoY only. However, during the quarter ended December 2011, profit growth of 75% YoY far surpassed the 20% YoY growth clocked in sales. Decline in advertisement and promotional expenses were again, the reason for this improvement in performance.

    Indiabulls Financial Services (returns in FY12 - 35%; returns in FY11 - 47%)

    With yearly returns of 35% YoY, Indiabulls Financial Services had a stellar run on the bourses over the past fiscal mainly on account of its robust financial performance. For the first nine months of the fiscal, the company saw a revenue growth of 57% YoY and a profit after tax growth of 37% YoY. The previous 9 month period had a one-time income from the sale of a stake in Indian Commodity Exchange. Adjusting for this, the growth this year would have been even higher. Advances also saw robust growth of 39.5% YoY over the period and asset quality also improved. For the past nine quarters the company has seen a continuous reduction in Gross and Net NPA levels. It maintains healthy liquidity levels and has reduced its reliance on short term borrowings adding to comfort. The company has also improved its operating efficiency with its cost to income improving to 18.7% in 3QFY12 from 21.1% in 3QFY11.

    Ultratech Cement (returns in FY12 - 33%; returns in FY11 - (2%))

    In March 2010, the Reserve Bank of India (RBI) kicked off its combat against rising inflation. Over the year and a half that followed, it raised key interest rates more than a dozen consecutive times. This severely affected the housing, construction and infrastructure industry, the main consumers of cement. So while the Indian central bank battled with inflation, the cement industry was struggling through a tough down cycle. Every variable seemed to be out of favour for the sector. Demand was muted. Excess capacity kept cement prices under pressure. To add to that, input costs rose significantly. However, in recent months, the business scenario has witnessed some revival. Cement demand picked up post the monsoons. Prices have also firmed up. Moreover, the fact that the RBI has halted further hikes in interest rates is a likely indication that the interest rate cycle has peaked. These factors caused a huge rally in cement stocks over the last three months. This is the key reason for UltraTech Cement's outperformance.

    Conclusion

    As you can see, the top performing stocks have been the investing communities' favorites for varied reasons. Apart from the good operating performances of these companies, the outperformance had a lot to do with the investor sentiments and factors affecting the overall economic environment.

    With this year's Union Budget being announced recently and the RBI hinting at a reduction in interest rates over time, the focus going forwards would be on growth and achieving a higher GDP growth. This will put companies that have been impacted because of reasons such as interest rate hikes, high input costs and slowing demand - basically sectors that have underperformed over the last year - back in focus. One would do well to focus good quality companies from these sectors. To put things in perspective, the top three underperforming sectoral indices during FY12 were the BSE-Metal, BSE-Capital Goods and BSE-Realty indices which declined by 30%, 24% and 24% respectively. For investors wishing to continue with a conservative investment strategy and looking at investing in defensive stocks, they would do well by studying the long term prospects of the industry (as well as the company). This is of course, considering that they pay the right price for the stock.

      Devanshu Sampat (Research Analyst) has a degree in commerce and nearly 5 years of experience in equity research. He draws inspiration from successful value investors across the globe and constantly endeavours to refine his own unique stock picking approach. While a firm advocate of the principles of value investing, he believes in adapting a versatile investing strategy in response to varying market conditions. Devanshu contributes to our Megatrend investing service The India Letter.

     

     

    Equitymaster requests your view! Post a comment on "Top performing largecaps of FY12". Click here!

      
     

    More Views on News

    How to Ride Alongside India's Best Fund Managers (The 5 Minute Wrapup)

    Jun 10, 2017

    Forty Indian investing gurus, as worthy of imitation as the legendary Peter Lynch, can help you get rich in the stock market.

    Were You Lured By Mr Market's Bait? (The 5 Minute Wrapup)

    Aug 23, 2017

    Mr Market lured investors into believing they'd bitten into a crash. Did you take the bait?

    Deep State First (Vivek Kaul's Diary)

    Aug 23, 2017

    Nowhere was the darkness deeper than in the nation's capital. There, no light shone. No flicker of awareness...observation...learning...or reflection appeared.

    Why Hasn't Warren Buffett Rung the Bell Yet? (The 5 Minute Wrapup)

    Aug 22, 2017

    It's surprising Warren Buffett hasn't warned investors about the expensive stock market? Let us know why.

    Think Twice Before You Keep Money In A Savings Bank Account (Outside View)

    Aug 22, 2017

    Post demonetisation, a cut in bank savings deposits rates was in the offing.

    More Views on News

    Most Popular

    This Small Cap Can Drive Chinese Players Out of India (and Make a Fortune in the Process)(The 5 Minute Wrapup)

    Aug 17, 2017

    A small-cap Indian company with high-return potential and blue-chip-like stability is set to supplant the Chinese players in this niche segment.

    The Most Important Innovation in Finance Since Gold Coins(Vivek Kaul's Diary)

    Aug 10, 2017

    Bill connects the dots...between money and growth, real money and real resources, gold and cryptocurrencies...and between gold, cryptocurrencies, and time.

    It's the Best Time to Buy IT Stocks(Daily Profit Hunter)

    Aug 16, 2017

    The IT Sector could be in an uptrend till February 2019. Are you prepared to ride the trend?

    Bitcoin Continues Stellar Rise(Chart Of The Day)

    Aug 10, 2017

    Bitcoin hits an all-time high, is there more upside left?

    5 Steps To Become Financially Independent(Outside View)

    Aug 16, 2017

    Ensure your financial Independence, and pledge to start the journey towards financial freedom today!

    More
    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
     

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms

    S&P BSE SENSEX


    Aug 23, 2017 (Close)

    MARKET STATS